【澳大利亚人报】Chinese ore price soars amid haggling

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Chinese ore price soars amid haggling
http://www.theaustralian.news.com.au/business/story/0,28124,25703749-5018066,00.html

Matt Chambers June 29, 2009

CHINESE spot iron ore prices have surged to a fresh four-month high, boosting BHP Billiton and Rio Tinto's fortunes as annual contract price talks with China head into uncharted territory.

Metal Bulletin-posted spot prices of iron ore at Chinese ports rose $US4 to $US81.50 a tonne in the past week, climbing above the equivalent price Rio and BHP recently negotiated with their other Asian customers.

The China Iron & Steel Association, which is the sole Chinese negotiator with BHP and Rio in this year's talks, has bucked convention by refusing to bow to a 33 per cent discount on benchmark iron ore fines contract prices agreed to by Japanese, Korean and Taiwanese steelmakers.

Instead, and despite opposition from individual Chinese steelmakers, CISA is holding out for a 40 per cent cut. If the talks, which started on April 1, stretch into July for the first time, the stakes will become higher. It will mean that, from Wednesday, some contracts can be dissolved, replacing the security of contracted ore with the volatility of the spot market.

CISA has said it is prepared to draw talks out beyond June 30, further putting at risk the traditional benchmark system. BHP is keen to kill off the traditional annual price negotiations and replace them with contracts based on price indexes.

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Deal on Rio-China iron ore price looms
http://business.theage.com.au/business/rio-keeps-china-iron-ore-talks-alive-20090629-d1xp.html

June 29, 2009 - 2:56PM

Rio Tinto, the world's No. 2 iron ore miner, is still in talks with Chinese steel mills over iron ore prices, the firm said today, dousing speculation that both sides had given up on a June 30 deadline.

Iron ore miners and their Chinese customers have until Tuesday to reach a pact on contract prices for the current fiscal year, but analysts have said the two sides appear too far part at this late hour to strike a deal in time.

"We are officially still in negotiations," a Rio Tinto spokesman said when asked if the parties had given up trying to hammer out a deal by the deadline.

Spot prices delivered in China have risen around 25 per cent this month to a four-month high above $US80 a tonne, adding around $US5 in the last week, on expectations millions more tonnes will hit the market unless the miners and mills reach agreement.

Spot prices are now trading at $US12 to $US15 a tonne over benchmark prices already set separately with Japanese and South Korean steel mills, which recently agreed a 33 per cent price cut.

The higher spot price could be encouraging producers to take a harder line with Chinese steel mills, which are holding out for a minimum price cut of 40 to 45 per cent.

Rio Tinto and world No. 3 iron ore miner BHP Billiton have argued against a benchmark price set below the spot level, saying it is unfair to producers and fails to accurately reflect market demand.

If the miners and Chinese mills reach a deal by Tuesday, the contract price would be backdated to April 1 and run until March 31, 2010.

BHP Billiton declined to comment on the state of play.

"We could see a lot more emphasis on the spot market next week," said DJ Carmichael & Co mining analyst James Wilson.

"That translates into volatility and that will be a positive for the price."

The Australians want the mills to agree to a 33 per cent price cut over last year, in line with benchmarks already set with Japan's Nippon Steel and JFE  and Posco  of South Korea or buy ore on the spot market.

Reuters

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